The Federal government should abolish the Cooking Oil Stabilization Scheme (COSS) palm oil cess that is discriminatory to oil palm planters, especially Sabah, and which would collect RM 1.8 billion in extra revenue when COSS subsidies required is only RM 390 million

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Press Conference  

by Lim Guan Eng

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(Petaling Jaya, Sunday): DAP urges the Federal government to abolish the COSS palm oil cess that is discriminatory to oil palm planters, especially Sabah, which would collect an estimated RM 1,790 million billion in extra revenue when COSS subsidies required is only RM 390 million. If only RM 390 million is required to subsidize cooking oil so that there is enough supply, why collect RM 1,790 million. Is the government returning the extra RM 1.4 billion to the oil palm planters?  

The palm oil cess imposed by the Federal Government on palm oil plantations nationwide is meant to subsidise the cost of producing 60,000 tonnes of cooking oil (palm olein) a month. COSS scheme was introduced to absorb the losses incurred by the cooking oil factory producers and packagers. The increase in the price of Crude Palm Oil (CPO) to more than RM 2,600 per tonne has caused a cooking oil shortage, when cooking oil factory producers and packagers refused to produce after operating at a loss, as the price of cooking oil was set at ceiling price at RM1,700 per tonne.  

Malaysian Palm Oil Board (MPOB) would implement the cess effective on 1 June 2007 following the Government's decision to implement the 2007 MPOB(Cess)(Oil Palm Fruit) Order 2007. Cess is imposed on planters who own oil palm plantations of more than 100 acres. The gazette dated 23 May 2007 is imposed on oil palm plantations of more than 100 acres affecting 3,639 estate plantations nationwide.  

Cess is imposed on production of a monthly CPO average of more than RM1,500 which is based on the quantity of FFB produced by the estate every month. The rate of cess is RM2 for every increase of RM100 of the CPO price increase starting from the basic CPO price level of RM1,500.  

Which means if the plantation produces 902.90 metric tonnes of a month and the CPO average price is RM2,700 per tonne while the cess imposed is RM26, the amount the planters have to pay is (902.90 x RM24) RM 21,669.60. Based on the average CPO price of RM 2,700 that is maintained for 12 months then the size of cess collected for one year will be as follows:-

(The above FFB tonnage figures are based on MPOB 2006 records.)

The Minister of Plantation and Commodities Datuk Peter Chin Fa Kui had said in the Daily Express on 21/07/2007 that  the subsidy required for paying Edible Oil Manufacturers to stabilize oil price as a controlled item is RM 390 million a year. The cess collected of RM 1,790 million is grossly unfair to planters as it far exceeds the subsidies required. 

The Federal palm oil cess has imposed an additional burden on oil palm planters in Sabah since the State Government is charging 7.5 per cent cess on CPO they produced, which if converted to oil palm fruit (FFB) terms is about RM37 per metric tonne of FFB. Such 7.5% cess on CPO produced is unique in Sabah and not imposed on other states.  

Further, owing to Sabah's geographical position, the planters are also absorbing the additional export freight chargers of CPO imposed by oil millers of about RM20 per metric tonne of FFB. In other words for every metric tonne of CPO produced by Sabah planters, Sabah planters get  RM57 less per metric tonne as compared to their West Malaysian counterparts. No wonder Sabah planters are angry over this double taxation by the government which is being seen as opportunistic in attempting to strip them of their hard-earned profit during good times when they did not receive any assistance during bad times.  

Whilst DAP supports the move to impose subsidies on cooking oil to ensure that it is affordable to lower income groups, such subsidies should be covered from existing taxes collected from increased revenue from Petronas or oil palm planters. Imposing additional taxes is unreasonable when we do not see such additional taxes imposed on Petronas and we do not see Petronas paying additional taxes or duties to cover fuel subsidies. 

Due to increase of CPO price from RM1,500/= to RM2,600/= per metric ton, Federal Government Stands to collect about RM1,603,800,000/= of additional income tax of (both payable and deferred) each year from Sabah and an additional tax of RM2,851,200,000/= from West Malaysia and Sarawak.                   

The increase in CPO price would enable additional taxes of RM 4,455,474,000 to be collected from existing taxes. Why can’t the government absorb the burden of a mere RM 390 million in COSS subsidies?  

The COSS cess is unfair to oil palm planters. It is a double injustice to Sabah oil palm planters who feel discriminated and neglected by both the Federal and state government. As taxpayers, we have a right to demand a full accounting for the monies spent especially an explanation for the extra RM 1.4 billion in excess of the cooking oil subsidies.